Although hard money loans are very different from conventional loans, there’s a good chance that you’ll need to put down a down payment in order to borrow from a hard money lender. This guide explains hard money loan down payment requirements and how they affect your ability to borrow.
How Much Money Do You Need to Put Down on a Hard Money Loan?
Most hard money lenders require you to put down 10 percent of a home’s after repair value as a down payment. However, every situation is different, and you should talk to a hard money lender about your situation before you start doing the math on a down payment. You should also calculate what you anticipate the after repair value of your investment to be, and prepare statements for any hard money lender you talk to.
What is After Repair Value?
After repair value is the value of a home after it’s been fixed up and is ready to sell. For example, if you purchase a home for $100,000 and fix it up so that it can sell for $150,000, its after repair value is $150,000.
The after repair value is what you can borrow against when you work with a hard money lender. In fact, when you work with a hard money lender, you may be able to borrow up to 70 percent of a home’s after repair value.
What is Loan to Value Ratio?
A loan to value ratio, or LTV, is the value of a property in relation to the loan on it.
Do You Need a Hard Money Loan?
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